London-listed Tullow Oil and South Africa's state-owned PetroSA have decided to boost their stakes in two Ghana fields by exercising pre-emption rights on Kosmos Energy's $550-million deal to acquire part of Occidental Petroleum’s interest in the deep-water assets.

The Jubilee and Twenboa-Enyenra-Ntomme (TEN) fields lie in the Deepwater Tano (DWT) block, which is governed by a joint operating agreement under which Tullow and PetroSA have pre-emption rights, a common arrangement in the upstream sector that grants existing partners first refusal on the sale of any interest in an asset.

Hours after Tullow's announcement on Thursday morning, Kosmos told the market it had received notice from Tullow and PetroSA that they intend to exercise their pre-emption rights in relation to the Oxy deal.

The Dallas-based player noted that the exercise of pre-emption rights is subject to finalising definitive agreements with Kosmos/Oxy and requires approval from state-owned Ghana National Petroleum Corporation (GNPC) and Ghana's Ministry of Energy.

If completed, Kosmos' ultimate interest in Jubilee would be reduced by 3.8% to 38.3%, which would see it retain about 80% of the original acquired interest.

For TEN, Kosmos said its stake would fall 8.3% to 19.8%, and woukd see it keep hold of just 25% of the original acquired interest.

As a result of these pre-emptions, Tullow would boosting its holding in DWT by 7.7% to 54.8% for $150 million — funded from existing resources.

This would in turn increase Tullow's equity interests in Jubilee and TEN to 38.9% and 54.8%, respectively.

Tullow chief executive Rahul Dhir said the deal is a “a value accretive, self-funded opportunity” that will increase its daily production by about 10% and generate additional cash flow to help accelerate debt reduction”.

The deal would also boost proven and probable resources by about 21 million barrels of oil equivalent, said the London-listed buyer, and has an estimated post-tax, net present value of $347 million.

Completion of the transaction is subject to finalising definitive agreements with Kosmos and Occidental and gaining government approval.

In mid-October, Kosmos and GNPC struck a deal to acquire Oxy’s DWT interests, paying $550 million and $200 million, respectively.

This deal would have seen Kosmos gaining an additional 18% interest in Jubilee and an extra 11% in TEN.

At the time of the deal, Kosmos said if pre-emption rights are fully exercised, this could reduce its ultimate interest in Jubilee by 3.8% to 38.3%, and in TEN by 8.3% to 19.8%.

Tullow's pre-emption will not affect the Ghanaian player’s purchase of part of Oxy's interest which means GNPC respective stakes in Jubilee and TEN will still increase to 13.64% and 10%.

* Headline and article updated after Kosmos released statement

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